Does the Additional Support for IMF Come With Expectation that Europe Will Jettison Austerity?

Saturday, 21 April 2012 16:51

That seemed to be what the NYT was telling readers in an article that began by noting the difficulties that the Dutch government is facing in pushing its austerity plan. The piece noted that a number of countries had committed an additional $430 billion to the IMF for dealing with fallout from the eurozone debt crisis, then added:

"But that money comes with the understanding that Europe will be vigilant in fighting off speculative attacks, bringing down unwieldy budgets and spurring growth."

The most obvious mechanism for spurring growth is ending austerity. However, the European Central Bank and the IMF do not appear to give any hint that they have this intention. If they continue to press government to "bring down unwiedly budgets," then they are taking steps to slow growth. If they don't understand this fact, then they are in the wrong line of work.